January 2015

5 Mar. 2015

Monthly data series on consumer prices and employment have been discontinued as part of International Labor Comparisons (ILC) and have been transitioned to The Conference Board Business Cycle Indicators (BCI) program. Monthly international indicators on inflation, employment and unemployment in the BCI database are prepared using ILC methodologies. To download these indicators, see the US BCI series.

In January 2014, annual inflation as measured by the Harmonized Index of Consumer Prices (HICP) decreased in 14 of 16 countries compared. 11 countries experienced deflation in January, the largest number since July 2009. The continued decline of oil prices in 2015 was a main cause of the deflationary environment. Only Sweden (0.4 percent) experienced an increase in inflation. See Table 1 and Table 2.

The United States experienced the largest decline in January from 0.2 percent to -1.0 percent, crossing the deflationary boundary. Spain, however, continued to have the lowest inflation level at -1.5 percent, and has been in a deflationary environment since July of last year.

December inflation remained below 1 percent in all countries compared, except Japan (2.9 percent) and Norway (1.9 percent). All countries covered except Japan and Sweden experienced lower inflation in January than one year ago. See Table 1.

Table 1. HICP-based annual inflation rate, 2012 - 2015

Harmonized Indexes of Consumer Prices (HICP), percent change from the previous year

2012

2013

Jan-14

Nov-14

Dec-14

Jan-15

United States

2.2

1.3

1.3

0.9

0.2

-1.0

Austria

2.6

2.1

1.5

1.5

0.8

0.5

Belgium

2.6

1.2

1.1

0.1

-0.4

-0.6

Denmark

2.4

0.4

0.8

0.2

0.1

-0.3

Euro Area

2.5

1.3

0.8

0.3

-0.2

-0.6

European Union

2.6

1.5

0.9

0.3

-0.1

-0.5

France

2.2

1.0

0.8

0.4

0.1

-0.4

Germany

2.2

1.6

1.2

0.5

0.1

-0.5

Italy

3.3

1.3

0.6

0.3

-0.1

-0.5

Japan

0.0

0.5

1.6

3.0

3.0

2.9

Netherlands

2.8

2.6

0.8

0.3

-0.1

-0.7

Norway

0.4

1.9

2.1

2.0

2.0

1.9

Spain

2.4

1.5

0.3

-0.5

-1.1

-1.5

Sweden

0.9

0.4

0.2

0.3

0.3

0.4

Switzerland

-0.8

0.1

0.2

0.1

-0.1

-0.1

United Kingdom

2.8

2.5

1.8

0.9

0.5

0.3

Note: The harmonized index of consumer prices (HICP) is an internationally comparable measure of consumer price inflation. Underlying HICPs are from the national statistical agencies of the countries compared and from the European Commission (Eurostat). Inflation rates are calculated by The Conference Board.

Source: The Conference Board, International Labor Comparisons program

Table 2. Change in HICP-based annual inflation rate, 2012 - 2015

Harmonized Indexes of Consumer Prices (HICP), percentage point change in inflation from the previous period

2012

2013

Jan-14

Nov-14

Dec-14

Jan-15

United States

-1.7

-0.9

0.1

-0.5

-0.7

-1.2

Austria

-1.0

-0.5

-0.5

0.1

-0.7

-0.3

Belgium

-0.8

-1.4

-0.1

-0.2

-0.5

-0.2

Denmark

-0.3

-2.0

0.4

-0.1

-0.1

-0.4

Euro Area

-0.2

-1.2

0.0

-0.1

-0.5

-0.4

European Union

-0.5

-1.1

-0.1

-0.2

-0.4

-0.4

France

-0.1

-1.2

0.0

-0.1

-0.3

-0.5

Germany

-0.3

-0.6

0.0

-0.2

-0.4

-0.6

Italy

0.4

-2.0

-0.1

0.1

-0.4

-0.4

Japan

0.3

0.5

-0.3

-0.4

0.0

-0.1

Netherlands

0.3

-0.2

-0.6

-0.1

-0.4

-0.6

Norway

-0.8

1.5

0.3

0.1

0.0

-0.1

Spain

-0.7

-0.9

0.0

-0.3

-0.6

-0.4

Sweden

-0.5

-0.5

-0.2

0.0

0.0

0.1

Switzerland

-0.9

0.9

-0.1

0.0

-0.2

0.0

United Kingdom

-1.7

-0.3

-0.2

-0.4

-0.4

-0.2

Note: The harmonized index of consumer prices (HICP) is an internationally comparable measure of consumer price inflation. Underlying HICPs are from the national statistical agencies of the countries compared and from the European Commission (Eurostat). Inflation rates are calculated by The Conference Board.

Note: The consumer price index (CPI) is a measure of consumer price inflation that is not strictly comparable across countries. Underlying CPIs are from the national statistical agencies of the countries compared. Inflation rates are calculated by The Conference Board.

Source: The Conference Board, International Labor Comparisons program

Table 4. Change in CPI-based annual inflation rate, 2012 - 2015

Consumer Price Indexes (CPI), percentage point change in inflation from the previous period

2012

2013

Jan-14

Nov-14

Dec-14

Jan-15

United States

-1.1

-0.6

0.1

-0.4

-0.5

-0.9

Austria

-0.8

-0.5

-0.3

0.1

-0.7

-0.3

Belgium

-0.7

-1.7

0.1

-0.2

-0.3

-0.2

Canada

-1.4

-0.6

0.3

-0.4

-0.5

-0.5

Denmark

-0.4

-1.6

0.2

0.0

-0.2

-0.4

France

-0.1

-1.1

0.0

-0.2

-0.2

-0.5

Germany

-0.1

-0.5

-0.1

-0.2

-0.4

-0.6

Italy

0.2

-1.8

0.0

0.1

-0.2

-0.6

Japan

0.3

0.3

-0.2

-0.5

0.0

0.0

Netherlands

0.2

0.0

-0.3

-0.1

-0.3

-0.7

Norway

-0.4

1.3

0.3

-0.1

0.2

-0.1

Spain

-0.8

-1.0

-0.1

-0.3

-0.6

-0.3

Sweden

-2.1

-0.9

-0.3

-0.1

-0.1

0.1

Switzerland

-1.0

0.5

0.0

0.0

-0.3

-0.1

United Kingdom

-2.0

-0.2

0.1

-0.3

-0.4

-0.5

Note: The consumer price index (CPI) is a measure of consumer price inflation that is not strictly comparable across countries. Underlying CPIs are from the national statistical agencies of the countries compared. Inflation rates are calculated by The Conference Board.

Source: The Conference Board, International Labor Comparisons program

strong>What Is the Difference between the CPI and the HICP?

The consumer price index (CPI) and the harmonized index of consumer prices (HICP) are both measures of inflation. They reflect the average change over time of prices paid by consumers for a market basket of customary goods and services. The CPI measures in this report have not been adjusted for comparability, whereas the HICP is an internationally comparable measure of consumer price inflation. For most countries, the differences between the CPI and the HICP reflect differences in the way owner-occupied housing is treated by the two indexes.

For more information, please visit The Conference Board website to consult the “Technical Notes” and “Country Notes and Data Sources” associated with this report. (See Links Below)

One of the most frequently talked-about economic indicators is inflation (i.e., the increase in prices over time). Simply put, inflation is when something costs more to buy today than it used to. Inflation, or price growth, reflects the decreasing purchasing power of a currency—you can buy less in the future than you can today with the same amount of money.

Governments focus much of their attention on maintaining price stability (i.e., low inflation), usually around 2 percent in the advanced economies. When inflation is too high, it can become volatile, creating uncertainty that disrupts business planning and can stall future investment. Investment decisions may be affected because high inflation erodes the real value of savings and can lead to higher interest rates to offset the declining value of money.

Inflation translates into higher prices not only for domestic consumers, but for consumers abroad as well. In the short term, this means that high inflation can deteriorate a country’s international competitiveness and decrease exports.

In the labor market, rising price inflation can signal the potential for wage inflation, either directly through contractual cost-of-living adjustments or indirectly through workers’ expectations that higher wages will be needed to compensate for increased prices of consumer goods.

Moreover, high inflation can trigger a wage-price spiral where workers demand higher wages to maintain their standard of living. If these wage increases outpace increases in productivity, unit labor costs increase, thus forcing businesses to increase prices (or face reduced profits), which, in turn, can lead to higher wage demands. In this context, comparable measures of inflation allow for comparison of potential wage growth across countries.

At the end of the day, businesses pay attention to inflation because it reflects how quickly their total costs of production are rising—or how their profit margin is changing—which influences their operational and investment plans for the future.

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